Brent: A Benchmark Brand & Platts Dated Brent Benchmark Explained

All day, Platts gathers and publishes in real time the price information it receives and after the close of trading, publishes a price assessment that reflects end-of-day value. The period just ahead of the close, when markets tend to be the most active is often described as ‘the window’.

Not in the price assessment processes of Platts, which include quality protocols that not only prohibit price gapping, but require a specified cut-off-period, after which no new information is allowed and which allows the marketplace to see and test the information it already has, before the close.

No. The most transparent price assessment methodology available worldwide, is Platts Market on Close (MOC) in oil, which identifies all data inputs by the name of the company submitting it, a feature that adds an accountability layer of data integrity.  Opaque methodologies shed no such light on the source of market transactions data.  

No, while all price information can be informative, it is not equal. The more detailed, the more verifiable, the more transactable the data is, the more valuable it is as a price indicator. Blackbox systems offer no transparency into data quality. 

Some 250 companies are participants in the Platts Market on Close oil price assessment processes across time, though participation on a daily basis varies by individual market participant buying/selling needs. The Platts MOC methodology is designed to ensure that no individual company has undue influence, and that prices are fully exposed to the marketplace for testing and the final day’s price assessment reflects the market as determined by buyers and sellers in the open market.

Commodity Insights has a zero-tolerance policy toward any attempts to manipulate or distort its price assessment processes or the price assessments they produce. Any report of distortion will be thoroughly investigated by Commodity Insights’ compliance and governance offices.

Platts price assessment processes include a host of quality protocols aimed at safeguarding against distortion, beginning with transparency -- publishing in real time for the full market to see all submitted data and identifying it by name of originating company. Other integrity steps include the requirement that: all bids and offers be hard, executable and repeatable; transactions be verifiable and repeatable; and all price data submissions be incremental in price move -- not gapping away from the market; and more.  Commodity Insights is aligned with and surpasses the guidelines of IOSCO’s Principles for Oil Price Reporting Agencies.

The Platts Market on Close is designed to perform in both liquid and illiquid markets. In the case of thin activity, it allows use of additional market data, such as historical and current intra- and inter-market spreads and other more. Trading activity in physical oil markets – which involve ships carrying more than two million barrels of oil --is  different than consumer- or investor-focused markets, which can involve commodity amounts of smaller size.

No. For over two decades, international oil markets have welcomed the addition of crude streams to bolster the volume of oil underpinning a benchmark, evidenced by Platts Dated Brent in 1990 (?) adding light sweet crude oils similar in quality to be deliverable as Brent in its price assessment processes. See timeline for the evolution of Brent to Brent, Forties, Oseberg, Ekofisk, Troll and WTI Midland (BFOETM). When Platts accepts an additional like-kind oil into a price basket, it consults with the marketplace and its intent is to be price neutral.

Any change of terms must be agreed to by both buyer and seller and it does not change the reality of the benchmark oil itself. For example, if a shipment of one of the BFOETM crudes experiences a buyer- and seller-agreed switch of boats, destination change, or contract terms, such as a switch from a cost, insurance and freight (CIF) basis to free on board (FOB), it does not alter the fact that the crude oil is still part of the Brent basket.

Market authorities in the Americas, Europe and Asia already have the authority to oversee commodities markets and do engage in investigations and punitive actions. Any pursuit of new or additional layers government intervention vehicles must be done with care and mindful to any unintended consequences including possible disruption to commodities markets and harming transparency and/or the voluntary price reporting to price reporting agencies, which could easily go away, leaving the world with a return to opaque markets and potentially without a benchmark provider.